For a firm that uses process costing,calculating equivalent units makes it possible to fulfill which of the following requirements of GAAP?
A)Assigning an appropriate value to assets
B)Assigning an appropriate value to liabilities
C)Expensing period costs as they are incurred
D)Recognizing revenue when it is realized or realizable

Question

Quizplus · Accepted Answer

Calculating equivalent units helps in assigning an appropriate value to assets by allocating the cost of production to units that are partially completed and converting them into an equivalent number of completed units. This is required by GAAP to properly value inventory and to ensure that assets are stated at their historical cost.

For a Firm That Uses Process Costing,calculating Equivalent Units Makes